The Changing World of Content & CommerceOverview of the Advertainment Revolution

The buttoned-up world of brand marketing and the freewheeling entertainment industry are not the most natural bedfellows. While hitching a brand wagon to a celebrity has always had appeal, most marketers have trodden warily in their relationships with Hollywood's seemingly unpredictable players.

New interaction

But shifts in technology and the media landscape have spawned a closer courtship between the two-necessity, it seems, is proving to be the mother of a new level of interaction.

The surprisingly robust 2002-03 broadcast network upfront last spring put to rest much of the nonsense about the impending death of the 30-second TV commercial. But there is no ignoring media fragmentation or the fact that emerging digital technologies are wresting power from the hands of the content provider and placing it with the consumer, forever changing the traditional paid-media advertising model.

"The biggest factor is the consumer. Boomers, X'ers and Y'ers are all demanding a different kind of relationship with advertisers," said Bruce Redditt, executive vice president at Omnicom Group, refering to the three advertiser-coveted age groups known as baby boomers, Generation X and the younger Gen Y. "Technology gives them the clout to do it with more control over their own programming, content and time. The new consumer is a severe challenge for traditional media buying practices."

CEO John Wren has charged Mr. Redditt with tackling this conundrum for the leading ad agency holding company.

Paradigm shift?

As a result, while Mr. Wren and his peers publicly place more revenue demands squarely on the shoulders of their below-the-line marketing services units, marketers march toward an increasingly integrated approach as well, reassessing their branding mix. One result of this collective reassessment is greater engagement with the entertainment industry, with the end game pointing toward a paradigm shift in which brand marketers view content providers less as vendors and more as partners.

Entertainment plays -- running the gamut from music licensing to movie product placements and TV sponsorships -- are certainly not new tricks in the marketers' bag. But their relevance and, in some instances, the controversy surrounding these tie-ins -- "content/commerce convergence" and "branded entertainment" are two of the more popular descriptors -- are demanding increasing attention in this changing landscape.

New TV universe

With the proliferation of media choice, driven by the explosion of new digital technology, the average consumer is bombarded with more messages than ever. Certainly, while the Internet has been debunked as a superior commerce venue over bricks-and-mortar outlets, its relevance as a viable advertising medium has maintained, rising above the chorus of skepticism. On top of that, digital cable television is gaining traction, as more and more cable operators are aggressively hawking their digital tiers, with nascent offerings in interactive TV and video-on-demand. As a result an increasing number of Americans are now enjoying the experience of a multi-hundred-channel universe, an environment in which they can escape from the stranglehold of network programmers.

This change has created new tensions, with the most public dust-up between the TV networks and advertisers on one side and the purveyors of PVRs, personal video recording devices, namely TiVo and ReplayTV, on the other. Both devices feature the ability to time-shift viewing while affording the convenience and efficiency of recording and storing programming on a hard drive. The ability to fast forward through or virtually skip commercials has the old guard up in arms and has even led to litigation against Sonicblue, with its Replay TV device.

Viewers' free lunch

No one has been a more vocal critic of PVRs than Jamie Kellner, Turner Broadcasting chairman-CEO. Mr. Kellner hasn't pulled any punches in expressing his concern that TV networks may someday be faced with a crippled business model, one that is currently fundamentally reliant on advertising revenue. He has said that using PVRs to alter a programmer's presentation by zapping ads is nothing short of "theft" and that viewers shouldn't expect a "free lunch."

Despite all of the hue and cry, PVRs don't pose an immediate threat, since only about 1 million American households have the capability. And even if the technology gains wider acceptance -- which seems likely with the future rollout of PVR-imbedded set-top boxes by cable companies and satellite operators -- many observers aren't necessarily convinced that this would lead to the devastation of the network TV business model. They cite how VCRs with their time-shifting capabilities did not cripple advertisers and the networks when they were rolled out decades ago, and how people already avoid commercials by surfing with their remote controls.

What all agree on is that the net effect of these trends forces the advertiser to be more creative in terms of how it works with content providers to keep their brands top-of-mind.

And the TV networks, movie studios and even record labels are listening. Cost containment is paramount for all of these companies in varying degrees as they seek brand purveyors as partners in defraying production, distribution and marketing costs that are spiraling out of control in a stubbornly stagnant economy.

Buying into lyrics

Record labels have recognized the potential, as evidenced by Island Def Jam wooing marketers with their diverse roster of artists for paid product placement and licensing opportunities. Most of the major record labels have set up strategic marketing departments, whose jobs are to pursue deals with advertisers in a more consistent, proactive manner than just reeling in the occasional one-off.

"There has always been an importance in working with brand marketers, but now it's even more vital because you can't just rely on any one medium anymore to sell the music; you have to saturate this new media culture," said Lee Stimmel, vice president of marketing and product development at Atlantic Records. "Secondarily, the economic model has changed. As an industry we are looking at brand marketers for a partnership to benefit both parties financially."

Record sales have plummeted in recent years because of online file sharing services such as Napster, and the increasing difficulty in getting radio airplay. With the emphasis on quarterly earnings that globalization of the music industry has wrought, labels have been shackled by the cost-disciplined ways of their corporate masters. The industry is clearly no longer the profligate playpen of larger-than-life characters such as the notorious former CBS Records honcho Walter Yetnikoff, and is now ruled by the suits, in places as far-flung as Japan and Germany, with little patience for deficit spending. Thus, partnering with brands is being recognized as an effective way to generate new revenue streams with the ancillary benefit of pumping record sales for their artists. For proof, look no further than the boost in units sold for Sting after he partnered with Jaguar Cars North America.

While product placement and co-marketing deals between advertisers and movie studios have been going on for years, don't be surprised if the number and the sophistication of these arrangements increase as the film industry relies increasingly on big budget tentpole features, and blasts out the hype for the make-or-break opening weekend.

Integrated marketing schemes

Sony-aligned Revolution Studios' Vin Diesel action adventure film XXX this summer has turned out to be a timely platform for General Motors Corp.'s modern reintroduction of the vintage Pontiac GTO, which was featured in the movie. With the franchise potential of this summer hit, GM can probably look forward to the strong possibility of an extended partnership with Revolution, which could lead to even more inspired integrated marketing schemes. Revolution founder and chairman Joe Roth's recent hiring of fashion executive James Costos to create innovative co-marketing opportunities with advertisers is a clear sign that the studio realizes the potential of these deals.

As for the TV industry, the popularity of reality programming on both network and cable TV has brought a raft of deals that go beyond the traditional commercial buy and now increasingly include more product placement and sponsorships. CBS' monster hit Survivor was a marquee opportunity for brands like Target and Reebok, although some critics were upset with the gratuitous nature of the product pitches. In general, producers and programming executives at the networks, not to mention advertisers, have become increasingly careful about not crossing the line with product placement -- preferring to redefine it as product or brand integration -- trying to avoid viewer tune-out by employing more subtlety and context.

Fox has received a fair amount of credit for having boosted the bar on contextual placement with its smash summer hit American Idol -- some argue they didn't raise the bar nearly enough -- which featured Coca-Cola's flagship brand as its main sponsor.

Pushing the boundaries

And as far as pushing the boundaries into new models goes, Who Wants to Be a Millionaire producer Michael Davies is developing a new show called Live from Tomorrow, which will be a commercial-free, hourlong exclusive platform for a handful of advertisers.

"Live from Tomorrow is an example of an attempt to organically integrate a new kind of advertising into TV and eradicate the 30-second commercial," said Matti Leshem, executive vice president of production company Diplomatic, and Davies' partner in the venture. "There are clearly brands out there who, like us, are willing to think about reaching consumers in a way that is completely recontextualized."

Perhaps the most intriguing tack that has emerged is attempts by advertisers to subvert the form by actually creating stand-alone entertainment vehicles around a particular brand. Undoubtedly the most celebrated example of this has been the BMW Films series on the Internet, "The Hire," starring a BMW sedan and its driver played by actor Clive Owen, directed by the likes of Ang Lee and the late John Frankenheimer.

The BMW Films buzz

The collaboration between BMW's brand advertising agency, Publicis Groupe's Fallon Worldwide, Minneapolis, and production house Anonymous Content created considerable buzz. The buzz was fed by a significant production and marketing budget, and culminated in an online Grand Prix at this year's International Advertising Festival in Cannes. The project's success has added more fuel to a spirited debate about what constitutes advertising in these changing times, what agencies are and what they should become. Its critics have questioned whether the effort has actually sold cars, dismissing it as more a vanity project than the manifestation of an inspired strategic idea. The client definitely believes the concept has legs, having commissioned a second round of movies with more A-list directors such as Tony Scott and John Woo.

"Traditional advertising will not go away, but we have to expand our palette of ways to reach increasingly hard-to-reach people," said David Lubars, president and executive creative director at Fallon. "The way to reach these people is to have them reach you, and that requires an entirely new set of creative tools."

Video-on-demand may also become another platform for advertisers to experiment with branded entertainment. Cable operator Cox Communications in its San Diego market recently started offering advertisers deals to showcase long-form ad programming ranging in length from 5 minutes to 30 minutes. The Diet Coke brand is running a series of vignettes about a young woman's experiences as a production assistant on a movie shoot.

Marketers developing content

A variation on this theme has clients co-financing entertainment properties. "Operating in a television world with diminishing returns, advertisers are willing to be more proactive and look at new ways to leverage the market, both creatively and financially. This includes the area of content development and financing," said Robert Riesenberg, executive vice president and director of Magna Global Entertainment, an entertainment marketing unit at Interpublic Group of Cos. It remains to be seen if clients will have the stomach to get into the programming business on a sustained basis.

Certainly a more cautious approach is to pool funds among a number of different underwriters, which is what the Family Friendly Programming Forum has done. A consortium including such package-goods titans as Procter & Gamble Co. and Johnson & Johnson is dedicated to funding script development of programming that would create an optimal environment reflecting values embodied in their own brands. The most visible beneficiary of this family values largesse is the WB's moderate ratings success Gilmore Girls -- a show about a 32-year-old single mother raising a 16-year-old daughter. ABC's new fall season entry 8 Simple Rules for Dating My Teenage Daughter, starring John Ritter, is another project funded by the consortium.

So how are these parties coming together to hammer out these arrangements?

Rainmakers and bottom feeders

Much like in the early days of the Internet, opportunists of every stripe are coming out of the woodwork. Those savvy enough, with the right Rolodex, can bank a lot of money by brokering relationships between advertisers and entertainment companies. The 10-percenters include everyone from talent agencies and management companies to lawyers and private consultants. Some deserve the appellation of rainmaker while others are voracious bottom feeders, whose eyes are bigger than their stomachs.

And what role do marketers' ad agencies play in all of this? Ad agencies and show business middlemen have always had an uneasy, and at times contentious, relationship. Just ask Interpublic CEO John Dooner. It was certainly one of the darkest days in the former Coke account manager's career at McCann-Erickson Worldwide when interlopers at the Creative Artists Agency usurped control of the flagship Coke Classic ad account under the auspices of Edge Creative. While McCann, in a display of will and resilience, was ultimately able to redeem itself, winning back much of the business years later, the move sent shock waves through Madison Avenue.

Ad agencies' declining relevance

That tussle is held up by some as a signpost in ad agencies' crawl toward marginalization. Couple that with public pronouncements over the years by the likes of WPP Group Chief Executive Martin Sorrell that ad agencies have ceded the high ground of strategic thinking to management consultants like McKinsey & Co., and you have agency players scratching their heads at how to reclaim their primacy as brand stewards in the eyes of both clients and the media.

To that end, Omnicom has been on the lookout over the past several years for properties in Hollywood that can give the holding company a broader palette of services. This has led to the acquisition of Hollywood integrated marketing outfits like Aaron Walton Entertainment and Davie-Brown Entertainment, both being parked within Omnicom's Diversified Agency Services unit.

Interpublic, for its part, has explored taking an equity stake in Endeavor, the Los Angeles talent agency that represents such stars as Ben Affleck, Matt Damon and Adam Sandler. But that effort has been stymied by the talent agents' inability to work out a new agreement with the Screen Actors Guild. Mr. Dooner has charged Mark Dowley with leading these efforts under the banner of Interpublic Sports and Entertainment Group. The acquisition several years ago of PMK/HBH, the Hollywood public relations outfit run by Pat Kingsley, notorious for her hardball tactics in controlling and shaping media access and coverage of her superstar clients such as Tom Cruise, was a harbinger of this grouping.

WPP has also trawled this space with a hand in Shine:M, a branded content vehicle for WPP clients; it's probably a safe bet that Mr. Sorrell has his eye out for more. And now that Publicis CEO Maurice Levy has closed his purchase of Bcom3 Group, officially being christened into the ranks of the elite holding companies, it will be interesting to track his interest in this space.

Hopeful, but wary

So will all of these flirtations between brand marketers and entertainment companies consummate in trusting, prosperous relationships or be stalled by suspicion and broken promises? One Hollywood studio executive, while hopeful, struck a wary tone:

"It sounds good on paper but the reality is that these are two very different cultures, and success in one far from guarantees success in the other."